Sources  of  Revenue 


135 


cost  of  necessary  supervision  should  fix  the  amount  of  the  fee  charged. 
A  fee  in  excess  of  the  cost  of  regulation  would  be  very  much  in  the 
nature  of  a  tax. 

Permits ,  Privileges  and  Concessions.  All  permits,  privileges 
and  concessions  should  as  a  general  rule  be  let  at  public  auction. 
No  free  privileges  should  be  granted.  The  fee  should  be  of  a  fixed 
amount  and  collected  periodically.  It  should  not  be  based  on  the 
net  or  gross  receipts  of  the  business.  This  plan  has  been  tried  in 
different  cities  and  is  thoroughly  discredited.  A  city  to  administer 
it  successfully  would  have  to  employ  a  large  staff  of  accountants 
and  detectives. 

Departmental  Fees.  Fees  charged  for  departmental  services 
should  not  exceed  the  amount  necessary  to  make  their  respective 
departments  self-sustaining. 

Municipal  Enterprises.  Municipal  enterprises,  waterworks, 
electric  light  plants,  gas  plants,  etc.,  should  not  be  operated  for 
profit.  The  rates  charged  should  conform  to  the  cost  of  service, 
including  of  course,  the  interest  and  amortization  charges.  To 
charge  more  than  this  results  in  unequal  and  inequitable  taxation. 


ACCOUNTING  BASIS  OF  BUDGETARY  PROCEDURE 


By  WillB.  Hadley, 

Chief  Accountant,  Department  of  City  Controller,  Philadelphia. 

An  accounting  system  to  properly  supplement  budget  proced¬ 
ure  must  provide  for  such  an  analysis  of  actual  and  estimated 
expenditures  and  receipts  that  the  official  and  the  citizen  may  pass 
judgment  upon  the  plans  proposed  for  the  new  year  by  a  comparison 
of  actual  expenditures  and  receipts  in  past  years  with  the  estimated 
expenditures  and  receipts  for  the  coming  year. 

Such  an  accounting  system  has  been  developed  in  Philadelphia 
by  City  Controller  Walton,  who  began  January  1,  1911,  to  analyze 
expenditures  by  fund,  organization  unit,  function  (or  activity), 
character  and  object.  These  classifications  are  indicated  in  the 
following  outline: 

Fund — General,  Loan,  Special  and  Trust. 

Organization  Unit — City  Treasurer,  Bureau  of  Water,  Sheriff,  etc. 

Function — Fire  Fighting,  Isolation  of  Contagious  Diseases,  Construction  of 
Sewers  and  Inlets,  etc. 

Character — Expenses  Incurred  and  Payment  of  Funded  Debt: 
Administration, 

Operation, 

Maintenance, 

Debt  Service  and 
Other  Expense. 

Property  Acquisitions. 

Net  Changes  in  Working  and  Current  Assets: 

Stores, 

Postage  and  transportation, 

Reductions  in  Current  Liabilities, 

Abatements  of  Revenue  and 
Expenditures  on  Account  of  Prior  Years. 

Object — Personal  Services, 

Services  Other  Than  Personal, 

Materials, 

Supplies, 

Equipment, 

Structures  and  Non-structural  Improvements  to  Land,  Land, 
Rights,  Obligations  and  Payment  of  the  Funded  Debt, 

136 


2  S'  | <~AA 


3  51.1 

H  \\ 


Budgetary  Procedure 


137 


Fixed  Charges  and  Contributions,  and 
Pensions  and  Retirement  Salaries, 
Losses  and  Contingencies 


The  above  sub-head  titles  are  complete  under  fund,  character 
and  object.  Under  organization  unit  and  function  only  illustra¬ 
tions  are  given  as  the  complete  list  of  these  two  classifications  would 
take  considerable  space.  They  are  both  given  in  full  in  City  Con¬ 
troller  Walton’s  budget  statement  for  the  year  1916. 

Probably  interest  centers  more  closely  upon  the  expenditure 
*  side  rather  than  the  receipt  and  income  side  of  budget  accounting. 
Expenditure  classifications  for  budget  purposes  should  cover  at  least 
a  three-year  period,  namely:  (1)  the  expenditures  of  the  last  com¬ 
pleted  year,  (2)  the  appropriations  of  the  current  year,  (3)  the 
expenditures  of  the  current  year  to  as  late  a  date  as  obtainable, 
(4)  the  estimated  expenditures  for  the  remainder  of  the  current  year, 
and  (5)  the  departmental  estimates  for  the  coming  year  for  which 
the  budget  is  being  prepared.  These  several  groups  of  figures  must 
be  subjected  to  a  common  classification  in  order  that  they  may  be 
comparable.  When  so  presented  the  eye  can  readily  follow  the 
changes  from  one  year  to  another  and  can  note  the  changes  in  the 
object  of  expenditure,  in  the  character  of  expenditure,  in  the  func¬ 
tion  (or  activity),  in  the  organization  unit  and  in  the  fund.  Any  of 
these  changes  may  be  significant. 

In  the  object  classification,  for  example,  an  increase  in  personal 
services,  materials  and  supplies  and  a  decrease  in  services  other  than 
personal  would  mean  that  more  of  the  city’s  work  was  to  be  done 
by  administration  and  less  by  contract.  A  decrease  in  rentals  and 
an  increase  in  property  acquisitions  would  indicate  expenditures  for 
permanent  properties  to  replace  leased  properties,  thereby  reducing 
the  fixed  charges  for  rentals. 

In  the  character  classification  a  marked  falling  off  in  mainte¬ 
nance  may  indicate  that  properties  and  equipment  are  not  being 
properly  maintained.  Large  expenditures  for  property  acquisitions 
should  be  reflected  in  increased  maintenance  expenditures  to  pro- 
/  vide  for  the  upkeep  of  the  newly-acquired  properties.  Increase  in 
operation  may  be  the  result  of  an  expansion  of  the  existing  functions 
(or  activities)  or  the  taking  on  of  new  functions  not  previously  per¬ 
formed  by  the  city  government. 

The  relative  use  of  loan  moneys  for  current  expenses  and  reve- 


138 


The  Annals  of  the  American  Academy 


nue  moneys  for  permanent  improvements  and  property  acquisitions 
is  clearly  set  forth  in  the  fund  expenditure  classification.  The 
classification  by  organization  unit  shows  the  expenditure  for  each 
department  and  bureau  and  the  classification  by  function  (or  activ¬ 
ity)  shows  the  expenditures,  actual  or  estimated,  for  each  one  of 
the  many  functions  of  the  government  of  the  city. 

In  order  to  have  available  for  budget  purposes  the  actual 
expenditures  for  the  last  completed  year,  it  is  necessary  to  keep 
expense,  stores  and  property  ledgers,  together  with  a  complete 
analysis  of  expenditures  by  the  foregoing  classifications.  These 
analyses  can  be  best  secured  by  punching  the  information  upon 
cards  and  sorting  and  tabulating  the  results  thus  obtained  by  means 
of  machines.  What  would  ordinarily  be  a  very  tedious  task,  if 
done  upon  analysis  sheets,  thus  becomes  a  very  simple  one  and  the 
results  are  secured  in  a  minimum  of  time. 

General  account  receipts  are  presented  in  the  budget  in  a  state¬ 
ment  which  shows  the  actual  receipts  of  past  years  and  the  esti¬ 
mated  receipts  of  the  coming  year  for  which  the  budget  has  been 
prepared.  In  the  budget  for  the  city  of  Philadelphia  referred  to 
above,  the  estimated  general  account  receipts  are  presented  in  two 
ways,  viz.:  (1)  the  departmental  estimates  of  what  will  be  received, 
the  purpose  of  which  is  to  show  any  discrepancies  in  the  five-year 
average,  (2)  the  five-year  average  made  by  the  city  controller  as 
required  by  act  of  assembly,  which  estimate  limits  the  amount  of 
general  funds  which  may  be  appropriated  by  city  councils.  In 
addition  to  this  annual  estimate  there  is  usually  a  fund  surplus 
available  at  the  closing  of  the  year’s  books,  arising  from  an  excess 
of  the  actual  receipts  over  the  estimated  receipts  and  from  merging 
balances  of  appropriations.  These  are  the  only  sources  from  which 
general  funds  may  be  secured  for  appropriation,  with  the  exception 
that  city  councils  may  authorize  a  temporary  loan  not  exceeding 
$1,200,000  redeemable  in  four  months. 

The  amount  of  loan  funds  that  becomes  available  for  appro¬ 
priation  each  year  depends  upon  the  increase  in  the  assessed  valua¬ 
tion  of  taxable  property,  upon  changes  in  the  gross  amount  of  funded 
debt  outstanding,  upon  the  increase  in  the  amount  of  city  loans  held 
as  investments  by  the  commissioners  of  the  sinking  fund  and  upon 
changes  in  the  status  of  other  liabilities  of  the  city. 

Special  and  trust  funds  become  available  for  appropriation 


Budgetary  Procedure 


139 


through  the  receipt  by  the  city  treasury  of  money  for  special  and 
trust  purposes,  being  appropriated  then  only  for  those  specific 
purposes,  for  which  it  was  received. 

In  addition  to  classified  statements  of  expenditures  and  receipts, 
a  budget  to  be  complete  should  include  comparative  balance  sheets, 
with  actual  and  estimated  figures,  and  comparative  operation  and 
surplus  accounts  with  actual  and  estimated  figures.  Such  balance 
sheets,  operation  and  surplus  accounts  may  be  found  in  City 
Controller  Walton’s  budget  statements  for  1915  and  1916. 

Budget  accounting  is  a  source  of  information  by  means  of 
which  the  citizen  can  fairly  judge  the  results  secured  by  officials  and 
their  programs  for  future  accomplishments.  I  say  “fairly  judge” 
because  I  do  not  believe  that  the  great  majority  of  American  citizens 
want  to  judge  unfairly  or  in  ignorance,  if  the  basis  for  fair  and  intelli¬ 
gent  judgment  is  presented  in  the  budget.  It  serves  a  second 
purpose  in  that  it  is  a  bulwark  of  defense  for  the  honest  official. 
With  it  he  can  defend  his  past  performances  and  explain  the  various 
increases  asked  for. 


UNIT  COSTS  IN  RECREATIONAL  FACILITIES 

By  Paul  T.  Beisser, 

Fellow,  New  York  School  of  Philanthropy. 

Of  the  $17.34  per  capita  paid  in  1912  in  cities  of  over  30,000 
for  all  governmental  costs,  sixty-four  cents  per  capita  represent 
the  expenditures  for  recreational  facilities.1  That  is,  of  the  total 
expenditures  for  governmental  expenses  3.7  per  cent  went  to  recrea¬ 
tional  purposes,  including  museums,  art  galleries,  bathing  beaches, 
playgrounds,  parks  and  all  other  recreational  facilities.  The  total 
spent  for  recreation  in  1910  was  $16,108,808.00,  or  fifty-nine  cents 
per  capita;  while  in  1903  only  thirty-four  cents  per  capita 
were  appropriated  for  this  purpose.  The  per  capita  expenditure 
of  the  thirty-three  “cities”  of  Massachusetts  in  1908  was 
eighty-seven  cents.2  The  1914  Year  Book  of  the  Playground 
and  Recreation  Association  of  America  shows  342  cities  maintain¬ 
ing  2,402  playgrounds  and  recreation  centers  at  a  total  expenditure 
of  $5,700,223.81  for  the  year  1913.  The  Detroit  Recreation  Com¬ 
mission  shows  for  the  coming  year  a  carefully  drawn  budget  of 
forty  items  amounting  to  $169,299.00. 

These  facts  indicate  that  recreational  facilities  are  beginning 
to  figure  as  items  in  the  municipal  budget.  While  the  appropria¬ 
tions  are  as  yet  inadequate  they  are  sufficiently  large  to  be  taken 
carefully  into  account,  and  they  are  rapidly  increasing.  A  further 
indication  of  the  growing  importance  of  this  item  in  the  budget  is 
the  fact  that  the  usual  practice  is  to  establish  such  facilities  under 
private  initiative,  playground  and  recreation  associations  and  the 
like,  and  when  they  have  proven  successful  to  have  them  taken  over 
by  the  cities.  This  means  that  in  the  future  the  cities  are  likely  to 
take  over  many  of  the  burdens  now  resting  on  private  shoulders. 
There  is  cropping  up  also  a  tendency  to  take  many  recreational 
facilities  out  of  the  “commercialized  amusement”  class  and  run 

1  Financial  Statistics  of  Cities  Having  a  Population  of  Over  30,000.  United 
States  Census  Bulletin,  1912. 

1  The  Cost  of  Municipal  Government  in  Massachusetts.  1908,  p.  17. 

140 


